Chapter 5: Corporate Social Responsibility

Business ethics are moral guidelines for the conduct of business established on notions
of what is right, wrong, and fair. Most business people depend on their own consciences
in making business decisions, reviewing their own moral and religious backgrounds for
guidance. However, people in business can also be influenced by their managers and
peers when making business decisions and may feel pressured to act unethically when
looking to make profits. Acting in an ethical way concerns distinguishing between right
and wrong and then making the right decision. It is rather easy to recognize unethical
business practices. For example, companies should not use child labor, they should not
unlawfully use copyrighted materials and processes, and they should not engage in
bribery. However, it is not always easy to constitute absolute definitions of good ethical
practice. An organization must make a competitive return for its shareholders and treat
its employees fairly. A company also has wider responsibilities; it should minimize any
harm to the environment and work in ways that do not damage the communities in
which it operates. This is known as corporate social responsibility.

Companies have a corporate social responsibility is about caring for the workers, giving
back to the community, and being financially, environmentally, and socially responsible.
Corporate Social Responsibility (CSR) is a business principle which emphasizes the
need for companies to behave as good corporate citizens, not just obeying the law but
managing their production and marketing activities in a way which avoids causing
environmental pollution or exhausting finite world resources. Some businesses behave
in a more socially responsible manner, because their leadership wants to do so, and
because of fear of environmentalist and consumer pressure groups and the media, and
concern for their reputation. Common practices of CSR include recycling, reducing
emissions, treating all employees fairly, giving back to the community by providing
services or support, building new parks for children, assisting the less fortunate in the
area, as well as being honest and disclosing appropriate information.

Ethics and Social Responsibility

Social responsibility is an ethical ideology, in which individuals are responsible for
executing their civic duty; the actions of a person must benefit the whole of society. In
this way, there must be a balance between economic growth and the welfare of society
and the environment. If this balance is maintained, then social responsibility is achieved.

The idea of social responsibility is based on a system of ethics, in which decisions and
actions must be ethically analyzed before moving forward. If the action or decision
causes harm to society or the environment then it would be thought to be socially
irresponsible.
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The philosophy of social responsibility and ethics applies in both individual and group
capacities. It should be included into everyday actions and decisions, especially ones
that will affect other persons and/or the environment. In the group capacity, a code of
social responsibility and ethics is implemented within the group and during interactions
with another group or an individual.

Businesses have established a system of social responsibility that is suited to their

company environment. If social responsibility is sustained within a company then the
employees and the environment are held equal to the company’s economics. Keeping
social responsibility within a company guarantees the integrity of society and the
environment are protected.

Philanthropic Model of Corporate Social Responsibility

Philanthropy is a Greek word that literally means ‘love of the fellow human.’ Using this
idea in business involves activities that are within the corporation’s judgment to improve
the quality of life of employees, local communities, and society. Giving donations to
charities, building of recreational facilities for employees and their families,
advancement of religious, racial and gender diversity at workplace, support for
educational institutions, and supporting art and support activities are some examples of
philanthropic responsibilities done by the corporations for the society and its welfare.
Businesses have no strict obligation to contribute to social causes; but it can be a good
thing when they do so.

Some critique philanthropic CSR for not being incorporated directly into an
organization's core business plan. For instance, many large arts organizations receive
funding from corporations in completely different industries because their executives
love music and wish to support a local symphony. Although philanthropic CSR may
provide public relations or branding advantages to a business, these benefits are not
always tracked as part of social accounting, making it difficult for these efforts to be
audited or held accountable to external benchmarks.

A business' philanthropic endeavors do not happen without oversight. Since the early
2000's, companies have sought to hold charities accountable for how the donations are
used. Accordingly, many non-profit organizations have taken up business practices for
measuring their own performance. Thus, these beneficiaries of philanthropy display
both a responsible use of the funds they have received and evidence of their
performance relative to their mission. Organizations engaging in philanthropic CSR can
then use those results to measure the effect of their own efforts to support social
causes.
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Social Web Model of CSR

An array of views on Corporate Social Responsibility would be included in what the
social web model of CSR. They all share the perspective that business exists within a
web of social relationships. This CSR model looks at business as a citizen of the society
in which it runs and business must comply with the normal ethical duties and obligations
just like all members of a society. While providing goods and services and generating
wealth and profits are two of business’ responsibilities, these do not surpass the other
ethical responsibilities that equally bind all members of a society.

Norman Bowie, a philosopher, has supported a version of CSR that would be

categorized under the social web model. Bowie explains that business has a similarly
essential ethical duty to respect human rights outside the limits of the economic view’s
duty to obey the law. Bowie labeled his approach as a Kantian theory of business
ethics. He began with the distinction between the ethical mandates to use no harm, to
prevent harm, and to do good. The responsibility to cause no harm overrules other
ethical concerns. People have a strong ethical duty to cause no harm, and only an
apparent duty to prevent harm or to do good. The quest for profit justly can be
constrained by the duty to cause no harm. On the other hand, Bowie acknowledges the
economic view that managers are the handlers of stockholder-owners and their duty to
further the interests of stockholders. So, managers’ duty to their stockholders overrides
the ethical imperatives to prevent harm, and to do good. Provided that managers cause
no harm, they have an obligation to maximize revenue.

According to Bowie, business has a social responsibility to respect the rights of its
employees, even when the law does not deem it necessary. Some examples of these
rights are: the right to privacy, the right to due process, and the right to safe and healthy
workplaces. In addition, Bowie asserts that business has an ethical duty to respect the
rights of consumers, even when it is not required by law. These rights include: the right
to safe products and truthful advertising. But, the contractual duty that managers have
to stockholder-owners overrides the responsibility to prevent harm or to do philanthropic
good.

Integrative Model of CSR

In the study of CSR, the question remains: Should business be expected to forfeit
profits for society? Most CSR research infers a strain between the pursuit of profit and
social responsibility. However, there have always been organizations that put this strain
to good use, companies that seek social ends as the very core of their mission. Non-
profits like foundations, schools and colleges, NGOs, professional organizations,
government agencies, and hospitals have social targets at the center of their
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operations. The learning and skills taught in business schools are as pertinent for non-
profit as they are in for-profit organizations.

There is an increasing realization that some for-profit firms have social targets as a
central part of the crucial mission of the organization. Two areas specifically, social
entrepreneurship and sustainability, there are for-profit organizations that do not
presume a tension between profit and social responsibility. Organizations that make
environmental sustainability as central to their mission are examples of the second
area.

Since these organizations bring social goals into the core of their business model, and
fully integrate economic and social goals, it is known as the integrative model of CSR.
On the surface, organizations that embrace the integrative model suggest no specific
ethical issues. Even supporters of the biased economic model of CSR would
acknowledge that owners of an organization are free to make the quest of social goals a
part of their business model. They would just argue that these social targets should be
part of every business’ mission.

It is not to insist that every business should embrace the principles of social
entrepreneurs and dedicate all their endeavors to service of social goals. Of course
there are other obligations that businesses are intended to address. Social
entrepreneurs illustrate that profit is not conflicting with doing good, and therefore that
one can do good profitably. In contrast, there are people who would contend that the
ethical responsibilities related to sustainability are important to every business concern.
At best, sustainability presents a model of CSR that propose that ethical goals ought to
be at the center of every corporate mission.

Exploring Enlightened Self-Interest: Does “Good Ethics” Mean “Good Business”?

Business is good for a community because it generates jobs and helps keep the
community alive and productive. Since business is a competitive industry by nature,
most businesses concentrate on increasing profit while seizing the larger share of a
market. Competition can be good for business since it pushes the business owner to
become more customer-centered and more efficient. But business, and competition in
business, only works for the benefit of everyone when ethics and integrity are included.

Ethics is defined as a system of moral principles of right conduct. Though many people
mistakenly liken morality solely with sexual behaviors, morality is much more. Morality
means being able to differentiate right from wrong in personal conduct; it incorporates
one’s overall character and how one relates with or to others. Although there is no
generally accepted or defined system of either moral values or right conduct, the
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majority of cultures include honesty, veracity, trustworthiness, and honor in their

definition of values and right conduct.

Integrity is crucial for an established business. Integrity is construed as incorruptibility,

moral soundness, veracity in speech and action, adherence to a code of moral values.
A business person of integrity is one who the customer can trust to conform to a system
of moral principles and right conduct. A business owner with integrity is beneficial to the
community not because of status, position, name, power, or wealth, but because the
community can trust this business owner to treat everyone with respect, speak with
certainty, act with honor, portray the community in its best light, and do business in
accordance with stable principles of morality and integrity.

Running with integrity and ethics, business owners can contend with similar businesses
without creating malice and bitterness. Acting with integrity can forge positive business
relationships even among similar, competing businesses.

There are some businesses that focus on profit but the truth is, even though people are
in business to make money, the real purpose of business is to bring needed goods and
services to a community in a harmless manner while keeping costs economical for the
average customer.

There has been a battle between doing business with integrity and making a profit
though deceiving customers or back door dealing that closes out other business owners
so the dealer can make money. This battle is threefold: first, the relationship between
the customer and the business owner; second, the relationship between the business
owner and the employee; and, third, the relationship between the business owner and
other businesses.

It is always crucial to be able to recognize and understand the ethics and integrity of the
person one engages in a business deal with, whether one is the customer, business
owner, employee, or involved bystander.

So how do ethics and integrity apply to business?

For business owners, it is vital to speak and act in a trustworthy manner. Doing this
makes customers and employees trust the owner’s word, policies and decisions. They
will trust that the business is not only about making profit, but about enhancing and
enriching the entire community.
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Another factor is respect. Owners and manages should respect employees and listen to
their ideas or concerns. Whatever differences an owner and his employees any have,
whether gender, position, age, educational background, or any other difference, it is
always important to treat each person with courtesy and respect. Customers and
potential customers deserve respect, as well. It is necessary to pay attention to their
complaints. Most people do not like to complain, so if they do, they might well have a
legitimate issue.

Proprietors need to honor any commitments made to employees, customers or clients.

Too often, business owners see giving donations of money or goods as more important
than giving time. Owners ought to be aware that often, most communities need
volunteers more than material donations.

Acting with honor is a vital characteristic of a business owner. In the present day
business world, an individual can find many opportunities to earn more through
unethical actions such as scamming another business; taking money without intent to
deliver a product or service as specified; taking money for one’s own pockets intended
for others or other uses; putting oneself in a position of power, and using this position to
set up a monopoly through intimidation or back door deals; etc. In the business
environment, there are many appeals to line one’s pockets unethically. Business
owners should not be perceived as someone participating in unethical practices to keep
loyal employees and customers.

Business owners ought to remember to be straightforward and honest; speak directly

and without evasion. One can be forthright without having to proclaim one’s beliefs and
political views to every customer. What people are most interested in is how people act
towards and treat others because this is where they are impacted most. One facet of
being forthright is being honest to customers about not being able to do a particular job.
Being honest and suggesting a competitor who can do the work well instead of trying
and failing will prove to customers one’s concern for their satisfaction and not just
money.

As for customers, it is paramount that business owners remember that every business
has two kinds of customers: external and internal. External customers are those who
enter a business establishment to make a purchase. Internal customers are the
employees, subcontractors or consignees. With the external customer, the owner’s
actions and words are one’s measure. Once external customers discover that they have
been lied to or cheated, they will slowly stop being a patron of that business.
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As internal customers, employees and subcontractors have a daily, firsthand

opportunity to take the measure of the business owner’s character. Internal customers
witness lying to customers, cheating customers, treating others with disrespect and
discourtesy, cheat employees, or speaking ill of other businesses. If owners or
managers attempt to use employees or subcontractors to their detriment and only to the
benefit of the business, these internal customers will be witnesses to these unethical
behaviors.

As an employer, business owners stand as a role model either for or against ethics and
integrity in business. Business owners set the tone for how business will be conducted
in your community. As an employer and business owner, it is solely their decision to
whether they earn a living the honorable way or to cheat or diminish others in the
community in pursuit of money. How they are perceived by their employees, fellow
business owners and customers is also their decision to make.

It may be tempting to badmouth other businesses to make one’s own look better; it can
be appealing to try to drive out one’s competition or use cronyism to ascertain the best
contracts or control over business in one’s community. Although tempting, there can be
adverse effects to these practices such as limiting one’s business growth, limiting
opportunities for people to find employment opportunities and remain in their
communities to raise their own families, and limiting new ideas that could potentially
offer long-term benefits to the community as a whole.

The reality is, business owners who lack ethics and integrity can inflict damage on a
community that can last for years. Whenever a lack of ethics or integrity dominates the
business scene, there is always a consequence. That includes the closing of
opportunity to others, the reduction of potential jobs in a community, the loss of
individual freedom due to intimidation and control, and eventually, the closing of the last
door of the last business.